To access extended pro and con arguments, sources, and discussion questions about whether the US should return to a gold standard, go to ProCon.org.
Prior to 1971, the United States was on various forms of agold standardwhere the value of the dollar was backed by gold reserves and paper money could be redeemed for gold upon demand. Since 1971, the United States dollar has had afiat currencybacked by the “full faith and credit” of the government and not backed by, valued in, or convertible into gold.
Since its founding in 1776, the United States has had a variety of monetary systems including bimetallic systems where the dollar was backed by bothgoldandsilver(1792-1862), a fiat monetary system (1862-1879), a full gold standard (1879-1933), and a partial gold standard (1933-1971). From 1971 to present the United States has been on a fiat monetary standard.
Although there is no official link between the dollar and gold, on July 31, 2020, the US Treasury reported holding 261.5 million fine troy ounces (about $11.0 billion) in gold between the Federal Reserve and the Mint. The US Mint holds about 2.8 million ounces of its gold as “working stock” to be used in the production of official US gold coins for sale to the public as numismatic collectibles, and for investment purposes.
According to the World Gold Council, as of the end of 2019, an estimated 197,576 tonnes of gold has been mined throughout history, with about two-thirds having been mined since 1950. Almost all of that gold still exists because the metal is virtually indestructible. If all 197,576 tonnes of gold were placed in a cube, the cube would only measure about 71.2 feet (21.7 meters) on each side. 47.0% of that gold is currently jewelry, 21.6% is in private investment, 17.2% is in official holdings, and 14.2% is in other forms.
PRO
- Gold retains a value that has been recognized across the globe throughout history, and a gold standard self-regulates to match the supply of money to the need for it.
- A gold standard would reduce the risk of economic crises and recessions, while increasing income levels and decreasing unemployment rates.
- A gold standard puts limits on government power by restricting the ability to print money at will and increase the national debt.
- Returning to a gold standard would reduce the US trade deficit.
- A gold standard would force the United States to reduce its military and defense spending and could prevent unnecessary wars.
- Many politicians, businessmen, and organizations support the return to a gold standard.
CON
- The availability and value of gold fluctuates and does not provide the price stability necessary for a healthy economy.
- A gold standard would limit the ability of the Federal Reserve to help the economy out of recessions and depressions, and to address unemployment.
- Gold standards create periodic deflations and economic contractions that destabilize the economy.
- A gold standard would increase the environmental and cultural harms created by gold mining.
- Returning to a gold standard could harm national security by restricting the country’s ability to finance national defense.
- Many prominent economists oppose returning to a gold standard.
This article was published on Aug. 12, 2020, at Britannica’s ProCon.org, a nonpartisan issue-information source.
As an enthusiast deeply immersed in the realm of monetary systems and economic history, my comprehensive knowledge extends from the evolution of various currencies to the intricacies of the gold standard. I've delved into historical contexts, economic theories, and contemporary debates surrounding the topic. Allow me to demonstrate my firsthand expertise by unraveling the concepts embedded in the article you provided.
The article primarily discusses the historical shifts in the United States' monetary systems, focusing on the transition from the gold standard to the fiat currency system. Here's a breakdown of the key concepts:
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Gold Standard (Prior to 1971):
- The United States, before 1971, operated under different forms of a gold standard, where the value of the dollar was backed by gold reserves.
- Paper money could be redeemed for gold upon demand, providing a tangible and fixed value to the currency.
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Fiat Currency (Since 1971):
- After 1971, the U.S. shifted to a fiat currency system, where the value of the dollar is not tied to physical commodities like gold but is based on the "full faith and credit" of the government.
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Monetary Systems in U.S. History:
- The U.S. has experienced various monetary systems, including bimetallic systems (1792-1862), fiat monetary systems (1862-1879), full gold standard (1879-1933), and partial gold standard (1933-1971).
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Current Status (Fiat Monetary Standard):
- Since 1971, the U.S. has been on a fiat monetary standard, with no official link between the dollar and gold.
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Gold Reserves in 2020:
- On July 31, 2020, the U.S. Treasury reported holding 261.5 million fine troy ounces of gold.
- The U.S. Mint holds a portion of its gold as "working stock" for the production of official gold coins.
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Global Gold Reserves:
- According to the World Gold Council, approximately 197,576 tonnes of gold had been mined by the end of 2019, with various allocations including jewelry, private investment, official holdings, and other forms.
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Pro and Con Arguments on Returning to a Gold Standard:
- Pro arguments include the historical recognition of gold's value, self-regulation of money supply, reduction of economic crises, limits on government power, and potential impact on military spending.
- Con arguments highlight the fluctuating value of gold, limitations on the Federal Reserve's economic interventions, potential economic contractions, environmental and cultural concerns from gold mining, and threats to national security.
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Prominent Support and Opposition:
- The article notes that many politicians, businessmen, and organizations support returning to a gold standard, while prominent economists oppose it.
In conclusion, the article provides a comprehensive overview of the historical context, current status, and arguments surrounding the debate on whether the U.S. should return to a gold standard, offering perspectives from both proponents and opponents of such a shift.
